While most experts have expressed concerns over the performance of the Indian market, Shankar Sharma, Global Trading Strategist at First Global, is confident that the market is going to make an all-time high this year.

“The stocks will double. The Sensex could touch 21,000-22,000 levels this year and if the election numbers are good (for the UPA), then It can happen in the first half of the year,” he said in an interview to NDTV Profit.

Commenting on the rupee’s future, he said that the rupee will prove as a big catalyst in deciding where the stock market goes this year.

Below is the complete interview. Don't miss the accompanying video.

What is your position or stance on the market?
 

We have ended bear market or the intermediate bear market. The market will definitely go higher than where we are just now. You might see bigger corrections in future. I don’t think you will be lower on 6 month basis going to be lower than where you are right now. 

The bear market has ended. This year could be easily a year in which markets will make a new all-time high because by the end of the year, this will be the 5th year of the bear market. 

The market has become cheaper by a good 60 per cent in the last five years because the nominal GDP growth has been 14-15 per cent over the last five years, that sort of discrepancy has lasted long enough. We are going to see a new all-time high this year. If the election numbers are good (for the UPA), then it can happen in the first half of the year.
 

 The intermediate bear market has ended, what do you mean by that?

Intermediate bear market in a longer term bull market, that's what I wanted to say and not that it's an overall bear market. We are still in a bull market. The phase from 2008 to 2011 has ended. We had a bad five years and now we are out of it... In all probability, we will make a new high this year.

What gives you the confidence to say that the market will make a new all-time high?
 

Stocks trading at 200 will be at 350. There will a lot of money to be made in what might just look like a 30 per cent move. Reliance is one of such stocks. Any number of stocks will double from here and those are the stocks we will focus on. Those are ones that will take the market to 21,000-22,000-25,000 levels in a year's time. Right now, I can see 20 of them out there.

What would you buy essentially?

Auto, PSU banks, infrastructure those would be 3 big trades you would do. We will also buy some of financials like REC, PFC. I wouldn’t be buying IT sector stocks, also HUL, ITC for sure. Those trades were relevant last year and not this year. We have a basket of 35-40 large liquid names that will make you serious money and that are what you need in this market. Why would you need 500 stocks when 40 are enough? 

Also, our view is that rupee will be anything like 44-45 per dollar. In next 15-18 months’ time it could be 40 per dollar as well. So when you have positive currency move 10-20 per cent in next 12-18 months you know foreign investors won’t want to be left out of that kind of currency move. 

The momentum has come back into the liquidity and that we have seen in January itself after having a dry, barren 2011. The situation changed just in one month. So, the rupee will be a big catalyst to decide where the stock market goes this year. I’m very optimistic on the future of the rupee.

Is this a March 2009 kind of a situation, where the stocks doubled?

Yes, that was a doubler. I doubt if the market can double that quickly because we doubled in a six months’ time. The market went down from 21000 to 8000 and from there to 16000. When the UPA truce election results came out, that was in May. So, between March and May, the stocks doubled. But that may not happen this time. We are not doing to be 34000 in a six months’ time. 

We will take our 22000 on Sensex, which will mean a lot of stocks will give 80-150 per cent returns.

What stocks will you pick up in infrastructure and why infrastructure?

Our philosophy is that we don't like or dislike a sector permanently. We turned bearish on infrastructure in 2007. Infrastructure stocks have been absolute disasters since then and they are relatively down on every level. But at some point they will become buys. Our view was that since 2012 is going be a year of policy changes, easier liquidity, easier money, lower rate and when rates are lowered, these kinds of sectors benefit from that because the operate on very slim margins. 

When the rates will be rolled back, you will see this sector will do well. Also, a lot of these companies have become efficient in the last three years of the bear market. 

They have improved their free cash generation or narrowed their free cash. So either a company is making a minus 200 crore free cash generation but this year they will be down to 100 crore. So this swing is important to the market. 

When you have a hugely cash deficient sector, a high interest rate hit sector, facing an easier liquidity situation and coupled with superior cash generation, then it is a recipe for a reasonable bull market emerge and that's what is happening. 

So that was out thesis back in December. This is the way this sector will pan out. Interest rate situation seems to ease a bit in 2012. Moreover, free cash looks like its narrowing in terms of the deficit or in some cases even going to surplus.

So, what kind of names are you looking at in the sector?

L&T or you can by HCC. IVRC Land JP Associates can also be considered. So you can take your pick and whatever you play, you will make money for the reasons I just outlined. 

The power & equipment sector has its issues. We had downgraded BHEL before. I’m very infused by looking at the energy in PMO.The prime minister is hands on on a number of industries. The order book situation is very worrisome but these sectors need to see some light. Unfortunately, it is unethical for the companies begging for bailouts but the industry has to survive. This is what happened in the telecom sector and now it is going to happen in the power sector. From the stock market perspective, that's great because in the market it is not about morality, it is about profits. So, all these stocks do very well.

How crucial are the state elections in your perspective?

It is not at all comparable to 2009-10. Only shallow watches of politics will make that kind of a comparison. It is not going to be game changer. I think it will be good for the UPA, overall. By and large, the elections will be positive for the UPA. But it won't result in a 20 per cent market rally for sure.